Demand-pull and cost-push influences on the price level
Prices across the economy can rise for two broad reasons. Either buyers are spending so much that firms push prices up, or producers face higher costs and pass them on.
Real World
After Russia's invasion of Ukraine in 2022, global gas and wheat prices surged — a classic cost-push shock that pushed UK inflation above 10% as firms passed higher energy bills onto consumers.
Exam Focus
For 'explain' questions, always identify the cause first (demand-pull or cost-push), then trace the transmission mechanism to the price level step by step.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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